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Prepaid Lease — Single-Payement Lease |
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The term Prepaid Lease refers to the concept of making a large single payment at the beginning of a car lease. Some lease companies allow it; others do not. The basic notion of a Prepaid Lease (sometimes called a Single Payment Lease or One-Pay Lease) is that you save money by avoiding finance charges and interest. This is only partially true and typically does not save the amount of money that might be expected. There are two amounts in a lease that incur interest or finance charges. First is the depreciation amount, which is paid off during the lease. Second is the residual amount which is the lease-end value of the vehicle. By pre-paying a lease you only eliminate the finance charges for the depreciation amount. Finance charges for the residual amount remain and are paid as part of the single payment of a Prepaid Lease. It must be pointed out that some dealers and lease companies do not calculate Prepaid Leases properly. The way it should be calculated, and the way that saves some money, is that the single payment should consist of the depreciation amount added to the total interest on the residual amount. However, some dealers and lease companies simply figure the normal monthly lease payment amount, including interest on depreciation, and sum all the payments to arrive at the single lease payment. This is incorrect and saves the customer no money whatsoever. For more information,
see: The Lease Guide
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